Capital

The Great Divide: Some Restaurants are Closing While Others Expand

Some of America’s most iconic brands have not been able to weather the pandemic storm of 2020. Others are expanding across the nation. Why the dichotomy? And what’s caused the great divide that allows some to swim while others sink?

Restaurants That Are Closing

Logan’s Roadhouse, a brand based out of Nashville and founded in 1991, filed for Chapter 11 bankruptcy protection in March 2020. On April 4, 2020, they closed all company-owned restaurants and laid off 18,000 employees.

They have since been bought by SPB Hospitality, a purchase that included a host of other former Craftworks Holdings brands including Old Chicago Pizza & Taproom, Rock Bottom Brewery, ChopHouse & Brewery, Ragtime Tavern Seafood & Grill, And Seven Bridges Grille & Brewery.

Pizza Hut is closing 300 locations after their largest franchisees filed for bankruptcy. The brand, like many others, will be focusing on pickup and delivery options.

Luby’s Inc., the parent company to Fuddruckers and Luby’s Cafeteria, announced the liquidation of assets on September 8, 2020. Some stores, including those that are franchise-operated, plan to remain open.

California Pizza Kitchen filed for voluntary Chapter 11 protection in July of 2020. In operation for 35 years, they believe this restructuring will enable them to emerge stronger than ever post-pandemic. They have closed 46 of their 200 locations.

In a declaration filed as part of the bankruptcy, CEO James Hyatt said, “For many restaurants, the Covid-19 pandemic will be the greatest challenge they will ever face; for some, it may also be their last.”

No truer words than those.

While many of these brands were having difficulty even before the pandemic struck, the shutdowns and restrictions became the final blow. Magic Brands LLC, the parent company of Fuddruckers, filed for bankruptcy protection back in 2010 and sold approximately 62 Fuddruckers locations. In pre-pandemic 2019, California Pizza Kitchen appointed advisors concerning a sale or restructuring.

Restaurant Chains Expanding

And then there are those brands that seem to be taking the pandemic in stride.

Le Pain Quotidien (LPQ), another brand that was struggling pre-pandemic, was purchased by Aurify Brands in June 2020. They have either reopened or anticipate reopening some 50 LPQ restaurants across 7 states. Approximately 150 previous Maison Kayser locations will be converted to LPQ units with an expected reopening date in early 2021.

Ohio-based Gosh Enterprises Inc., home to Charleys Philly Steaks, BIBIBOP Asian Grill, and Lennys Grill & Subs, announced the opening of over 100 restaurants in 2021. This includes 50 additional Charleys Philly Steaks stores with a goal of 1,000 over the next few years. The healthy Asian concept, BIBIBOP, is looking to acquire 15 additional locations.

According to Elias Moaikel, president of Lennys Grill & Subs, “2020 was really a time for hitting the pause button on development. We learned a lot and took the opportunity to lay a solid foundation for growth. We anticipate adding about 10 new locations in 2021.”

Is this the business practice that separates the brands that are closing from those that are expanding? The ability to create a solid foundation?

While this may be a part of the great divide, others see the entrepreneurial and creative spirit of restaurant owners and operators as the key. Some simply refuse to give up and continue to fight by pivoting their business model into grocery stores, drive-thru concepts, or adding a strong online presence including takeout and delivery platforms.

Founding Fathers, a farm-to-table concept established by the North Dakota Farmers Union, regrouped after closures started in March. Five of their units were turned into the Founding Farmers Market & Grocery and started producing $125,000 a day in grocery sales.

Wingstop is another brand on the rise. The quarter ending in June saw a 37 percent increase in sales, up to $509 million. By the end of 2020, they plan on opening at least another 120 new locations. CEO Charlie Morrison told Restaurant Business that digital ordering and their delivery and takeout model is the key to their success. In fact, it’s working so well that they will “likely be one of the last chains to open our dining rooms again.”

Still, others see different opportunities instead of an unrelenting tragedy. Gregg Koffler, VP of franchise sales and development for Paris Baguette, saw real estate opportunities in pandemic-torn cities such as Los Angeles, New York City, and Florida where landlords are swimming in closed retail locations and offering reduced rent and other incentives.

With the rising number of COVID-19 cases and the reclosure of restaurants and bars around the nation, it’s unclear just where many of these well-known brands and independent operators will find themselves in 2021. What is clear is that those who will survive have put on their entrepreneur caps and looked beyond their initial business model.

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